Daily Trends Now
Daily Trends Now

Mnuchin isn't blaming the Fed for the market rout, says it's a '

Mnuchin isn't blaming the Fed for the market rout, says it's a '

That is bad news for homebuyers and other prospective borrowers.

President Donald Trump renewed his attacks on the U.S. central bank on Thursday, saying it was "too aggressive" in raising interest rates. If you look at their economy now, it's a whole different ball game. "Under the Obama administration, you had a lot of help because they had very little interest", Trump told reporters at the White House Thursday while responding to questions on the down sliding of the stock market for a second consecutive day.

If the U.S.is not careful, other countries around the world can lend at lower rates than the US and continue to stimulate their economies through smart lending and smart exporting.

It's the latest sign that markets may be struggling to adjust to a new era, where returns are no longer juiced by the ultra-low rates that prevailed in the years following the Great Recession.

But beyond those headline numbers, the details of how the prices of different types of securities have moved relative to one another tell a story that is decidedly optimistic. Two weeks ago, the Fed raised its benchmark rate for the third time this year, and the federal funds rate now sits at a range of 2.00 percent to 2.25 percent. For almost a decade after the 2008 financial crisis, the Federal Reserve's policy of low interest rates kept bond yields low, which hurt savers and those looking to diversify their portfolio. As the rates rose, there would be a drop-off in demand for loans. So even in Italy, which is in the midst of a budget crisis, the 10-year bond yield is just above 3.5 per cent - not much of a risk premium over Treasuries there.

Mr Trump's comments follow several days of declines in United States stock markets. "It's reflecting the possibility that this recovery has further legs". Expect more of the same over the coming weeks and months, as the USA economy adjusts to the withdrawal of the Federal Reserve's post-crash monetary stimulus, and a reckless administration persists in testing investors' nerve.

Leaders of the Fed have indicated that they expect to keep raising their target interest rate to around 3.4 percent by the end of 2020, up from the current level of just above 2 percent.

That may cause some heat for Powell, but it's unlikely to bother the financial markets.

Yet, Lesetja Kganyago, governor of the South African Reserve Bank who was alongside Carney on the panel, said regulators need to be "given the space to act independently without political interference" in order to advance many agendas. "The Fed is going loco and there's no reason for them to do it and I'm not happy about it".

"That wasn't it", Trump said this week in response to the China theory for the market drop. "The trend is clearly up, and the market is betting that will continue".

Of course, there are downsides to the higher rates.

Stocks have sold off in recent days on worries about higher borrowing costs. "Now, they are trying to get sanity back and raise them to the proper level", Rogers noted. Housing has already shown softness in some markets in recent months.

The broad US stock market sell-off Wednesday took the S&P 500 to the lowest in three months, the Dow Jones Industrial Average plunged as much as 836 points and the Nasdaq 100 Index tumbled more than 4 percent for its worst day in seven years.

A spike in yields on U.S. 10-Year Treasury bonds, which are hovering at a more-than-seven-year high, has investors wondering if the near-decade-old bull market in stocks may finally be ending.

Former Treasury Secretary Larry Summers said the economy was on a "sugar high" that had been fueling stock prices.


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